Final Rule Creates Programs to Help Avoid Adverse Selection in Exchanges

Tuesday, March 20, 2012

Final Rule Creates Programs to Help Avoid Adverse Selection in Exchanges

A final rule issued Friday by the Department of Health and Human Services implements 3 programs under the Affordable Care Act to help ensure that insurance plans compete on the basis of quality and service and not on attracting the healthiest individuals.

The new standards related to risk adjustment, reinsurance, and risk corridors will mitigate the impact of potential adverse selection and stabilize premiums in the individual and small group markets as insurance reforms and the Affordable Insurance Exchanges (Exchanges) are implemented, starting in 2014. The permanent state-based risk adjustment program provides payments to health insurance issuers that disproportionately attract high-risk populations (such as individuals with chronic conditions). The transitional state-based reinsurance program serves to reduce uncertainty by sharing risk in the individual market through making payments for high claims costs for enrollees. The temporary federally administered risk corridors program serves to protect against uncertainty in rate setting by qualified health plans sharing risk in losses and gains with the federal government.

Last week, HHS issued 2 other rules concerning Exchanges. A final rule issued March 12 establishes a framework to help states set up Exchanges. A final and interim rule issued March 16 sets eligibility standards for Medicaid and Children's Health Insurance Program beneficiaries within Exchanges. These rules have significant implications for patients and physical therapists regarding mandatory essential health benefits (EHB), which include the category of "rehabilitative/habilitative services," although the details of EHB will be addressed in future rule-making.